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How to save for a house deposit

Strategies, tips and clever ideas to help you get a deposit together and buy your home.

Saving the deposit to buy a property can takes years. But with financial discipline and some creative tips you can build up a deposit for your home loan faster than you think.

Here’s what you need to do to.

1. Determine your deposit size

The typical house deposit is 20% of the property price. But many lenders will accept a deposit as low as 10% or even 5%.

Just be aware that a smaller deposit means borrowing more money and therefore paying more interest over time. Also, when your deposit is less than 20% you may need to pay lenders mortgage insurance (LMI). This can add thousands to your costs.

Your deposit size

There are two parts to a property purchase:

  1. The deposit. This is the amount you must have saved to buy the property.
  2. The loan amount. This is the money you borrow.

Here’s an example:

  • Property price: $500,000
  • Deposit: $100,000 (a 20% deposit)
  • Loan amount: $400,000

In this example, buying a $500,000 property means a 20% deposit of $100,000. But if you went for a 10% deposit you’d only need to save $50,000 (but you’d have to pay LMI costs).

In short, your deposit size really depends on how much you can afford to borrow and how much you can realistically save.

Do some research

Research areas you’d like to live in and look properties for sale to get some idea of what’s on the market. Then look at your income and expenses. You’re probably paying rent currently, so use this loan repayment calculator and see what mortgage repayments would look like compared to your rent.

Read more on how much you should save for your deposit

2. Get serious about saving

Once you have your deposit goal in mind it’s time to get serious about saving. Here are some basic, essential tips:

  • Examine your spending. Track your spending using an app, such as Mint, and get a detailed breakdown of what you really spend each month.
  • Set a budget. Using your spending breakdown, set a realistic budget and work out where you can make cuts to your current spending.
  • Pay off urgent debts first. Get any debt under control as fast as possible. Prioritise high interest debt first: student debt is much less urgent than credit card debt.
  • Maximise your savings. Put your money to work while building your deposit with a high interest savings account or consider putting some of your savings in a term deposit.

If you have an asset you could sell, like a car you don’t need or some shares, you might consider selling them and putting the money towards your deposit.

3. Get help with your deposit

Daughter and her father saving money together.Beyond saving more and spending less, there are some ways you can scrape a deposit together you might never have considered.

Several of the tips below require family wealth. We understand that this can be a very helpful resource for some borrowers and completely impossible for others. But while not all of the tips below will apply to all borrowers, even just one could be a big help:

  • Parental guarantor. If your parents own their home and are willing to guarantee part of your deposit you can avoid LMI and save a smaller deposit. Read our guarantor mortgage page for more information.
  • Cash gift. If your parents are able and willing (and we understand this is not often the case) they could provide a cash gift to boost your deposit there. There are just a few rules you need to be aware of, such as providing a signed declaration from the person stating that the money is a gift and not a loan requiring repayment.
  • Live with parents. If your parents can’t provide financial support they might be able to help you save by letting you move back home. Yes, that might sound like a nightmare, but how much easier is saving a deposit without rent?
  • First Home Grant. The government gives a cash grant for first home buyers. You usually need to buy an existing or newly built home under a certain price in order to qualify. If eligible, you can use the grant to form part of your deposit.
  • First Home Loan scheme. First time home buyers can take out a home loan for only 5% deposit through select banks and building societies around the country, the scheme includes: Westpac, ASB and Kiwibank.
  • Kiwisaver withdrawal. If you have Kiwisaver, then you can use some of it under the Kiwisaver First-home Withdrawal to use towards your deposit. You must have belonged to the scheme for at least 3 years.

Watch: How much should you save to buy a house?

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